I am trying out a strategy that involves using Inside Bars breakout to give me signals. Sometimes I get a signal that would make me bet on both sides of a currency. For example: shorting EURUSD and going long on USDJPY. Most times, I think, at least one of the trade will end up losing. So should I not be doing this? Should I not take two trades that bet on the opposite sides of the same currency for example long USDJPY and short EURUSD? Can someone explain to me how this works?
If JPY is weaker than USD and EUR is stronger, then you can win both trades. However, you can consolidate that into one short EURJPY trade and save 50% commission
Being short EUR/USD and long USD/JPY equates to two long positions on the USD, so your exposure to risk arising from a weakening USD is doubled. This is over-focusing on one currency and is best avoided unless you have a very consistent track record with your system.
You could wait for one trade to reach a new price where you can move its stop-loss to break-even, this reduces its risk to zero, so now you could add a second position on the same currency.
1 Like
I think this is a very good point. You should definitely look at the correlations between the pairs that you trade so that your risk is well diversified. In this case EURUSD & USDJPY are usually negatively correlated in both price and the weighted change in price.
You should look at the correlation between the pairs if you want to diversify your risk.
The pipsology school has this information on currency correlation here: Currency Correlation Explained - BabyPips.com.
Currency correlations between pairs are not fixed and usually change with time, so you would want to check what the absolute correlation is at the current time for your pairs and time frame as well as what the historic correlations looked like. This will give you an idea of where the true average correlation tends to sit.
There are free resources online to check the pairs correlation. Alternatively I would recommend this Buy the 'PipTick Correlation MT4' Technical Indicator for MetaTrader 4 in MetaTrader Market. It gives you the correlation values for a number of pairs in table form (matrix).
Incidentally I recently put up a post about which property you should check the correlations for to achieve better diversification. The candidates where:
- Correlation based on the historic prices of the two pairs (this is the standard form correlation) or
- Correlation based on the historic change in price of the two pairs
- Correlation based on the historic weighted change in price of the two pairs (this looks at direction and magnitude of the prices changes as a fraction (or %) of the price of each pair.
I have also written a simple indicator which compares these types of correlation for two pairs in graph form. I will send it to you by PM.
I have experienced currency reversals many times and lost most of the times (in a demo account) came out a loser. What I have discovered in watching price action is that certain currencies reverse very quickly. Take for example USD/JPY. This currency pair can be in an uptrend for a while, consolidate, and start a downtrend without notice. I am not going into technical vocabulary since this is not my strong point. If you go to different time frames (4 hours, daily and weekly charts) you can see patterns developing. I found that out the hard way with EUR/USD and CHF/USD. The beauty of Forex is that you can close out a position at a loss and go the opposite way when the trend reverses. Most of the time you have a good chance to either break even or come out ahead. This is what I have experienced in the past few trading sessions. Hope this has some bearing on the topic! 
I am also very interested in betting on sports games. It is a very long story so I would just tell you I like betting since I was five years old because I was always sitting with my grandfather and father in front of our TV and watching basketball or anything else because my grandfather and father were betting. So now I am betting too but it is much easier than those times because I found some good promo codes https://bet-country.com/dk/bonus/mrgreen.